that sounds way too cheap IMO. Customers aren't paying for the digital negative. They are paying for your expertise, lighting, posing, retouching, etc. Selling a digital picture for $5-$10 doesn't make sense to me and I have a hard time believing someone could make a living at it unless they were absolutely hooked into the public school system or some other built-in franchise.

Are you deriving your sole income from this endeaver? Not criticizing, just trying to get a frame of reference for your pricing.

For me, I spend a 15 min to a 1/2 hour retouching an image. My time is worth $50-$100/hour.

Yeah, I have been hearing all about how they pay for your expertise and equipment and you have to cover insurance and fuel and car payments and depreciation and wear and tear on your shoe leather etc for over 20 years now. Funny, a lot of the people that used to ram it down peoples throats the hardest have disappeared now.

I have never heard of a customer persuaded to spend more from that argument yet. I have actually had it laid on me though by someone in another field and my response was pretty much " If you don't like the business your in, get out, but don't blame me because you're not happy or want me to pay for your overseas holiday. "
Of course thats essentially what we do but I just don't want it put on me like it's my responsibility to keep the guy happy. Give me your price and I'll tell you whether it's agreeable to me or not.
Not interested in justifications and bleeding heart stories.

At the end of the day we work in a highly over saturated market and we can't always get what we want, sometimes we have to take what we can get. If I'm in profit and making an average weekly wage, then things aren't too bad. If I'm making more, then things are good.

I very rarely retouch. I don't even crop too often. I usually run a batch colour correction and that's it. If you were investing an hour to 2.5 hours for $50, I can well see why it wouldn't be worth your time. I'd go nuts doing all that retouching personally no matter what I was paid.
I'm a photographer who likes to take pictures not sit on a computer but I realise other people are different and choose different markets that may force them to spend long hours editing.
I do school and event work and like to have it finalised on the day.

Like I said, digital delivery doesn't work for every market. I don't use it for every market myself.
I am doing my first total Digital delivery wedding next weekend in the form of a slide show.
Digital delivery may not work for you, i'm just giving you some feedback on what works for me. Maybe you can apply something that I have found to be successful, maybe not. Just sharing experiences.

I get very disappointed if I only make $3k a week. I average around $6k and my best week was over $9K.
My costs fixed costs are about $1200 per week. Variable costs are the amount of USB's and prints we sell.
I would invest probably around 50 hours all up per week on the job including travel back and forth
so my hourly earn would be in line with what your time is worth.

The average price per image may be cheap but I'm generally satisfied with the take home and that's really the number I'm most interested in.